Monday, September 2, 2013

The U.S. Court of Appeals for the Sixth Circuit recently affirmed the dismissal of a complaint alleging a violation of the federal Equal Opportunity Credit Act, because the plaintiff failed to allege sufficient facts to support his allegations that similarly-situated Caucasian borrowers had received better treatment than he, in light of the fact that the borrower did "not identif[y] any similarly situated individuals whom [the bank] treated better."

A bank extended a loan to an entity owned by an individual of Iraqi descent (the "borrower"). The borrower guaranteed the loan, and various companies operated by the borrower put up collateral for same.

The borrower defaulted, but reached an agreement to restructure the loan with the bank. When the borrower allegedly requested an additional extension of the deadline to repay the loan, the bank allegedly refused, notwithstanding the borrower's alleged offer of additional collateral and the guarantee of the borrower's wife. The borrower allegedly requested an explanation, which the bank supposedly refused to provide.

The borrower and the various relevant entities operated by the borrower then sued the bank, alleging violations of the Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691 et seq (the "Act").

As you may recall, Federal Rule of Civil Procedure 8(a)(2) provides that a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief."

On appeal, the Sixth Circuit began by surveying two Supreme Court decisions which interpret Rule 8(a)(2). The Sixth Circuit summarized these decisions as confirming that Rule 8(a)(2) "imposes legal and factual demands on the authors of complaints." See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ("Twombly") and Ashcroft v. Iqbal, 556 U.S. 662 (2009) ("Iqbal").

After examining these two decisions in depth, the Sixth Circuit noted that in their aftermath, plaintiffs cannot overcome a Rule 12(b)(6) motion to dismiss "simply by referring to conclusory allegations in the complaint that the defendant violated the law." Instead, the Sixth Circuit stated that plaintiffs must plead "factual matter" sufficient to raise a plausible inference of wrongdoing. To determine the plausibility of an inference, courts must consider "a host of considerations including common sense and the strength of competing explanations for the defendant's contact". See Iqbal, 556 U.S. at 682; Twombly, 556 U.S. at 567.

With that standard in place, the Sixth Circuit had little difficulty in sustaining the lower court's decision to dismiss the complaint. It observed that the borrower's "Iraqi origin does not by itself establish the requisite inference." Further, it found a plausible non-discriminatory explanation for the bank's conduct, noting that "a bank, once bitten by the failure to receive repayment of an initial loan on time, may understandably become twice shy about restructuring a loan a second time."

The Sixth Circuit acknowledged that the borrower's pleadings alleged that similarly-situated Caucasian borrowers had received better treatment than he. However, the Sixth Circuit determined that this allegation was not enough to survive the bank's motion to dismiss, in light of the fact that the borrower did "not identif[y] any similarly situated individuals whom [the bank] treated better."

Accordingly, the Sixth Circuit determined that "[t]hese are precisely the kinds of conclusory allegations that Iqbal and Twombly condemned and thus told us to ignore when evaluating a complaint's sufficiency," and therefore affirmed the lower court's decision to dismiss the borrower's complaint.

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Ralph Wutscher's practice focuses primarily on representing depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, distressed asset buyers and sellers, loss mitigation companies, automobile and other personal property secured lenders and finance companies, credit card and other unsecured lenders, and other consumer financial services providers. He represents the consumer lending industry as a litigator, and as regulatory compliance counsel.

Ralph has substantial experience in defending private consumer finance lawsuits, including cases ranging from large interstate putative class actions to localized single-asset cases, as well as in responding to regulatory investigations and other governmental proceedings. His litigation successes include not only victories at the trial court level, but also on appeal, and in various jurisdictions. He has successfully defended numerous putative class actions asserting violations of a wide range of federal and state consumer protection statutes. He is frequently consulted to assist other law firms in developing or improving litigation strategies in cases filed around the country.

Ralph also has substantial experience in counseling clients regarding their compliance with federal laws, and with state and local laws primarily of the Midwestern United States. For example, he regularly provides assistance in connection with portfolio or program audits, consumer lending disclosure issues, the design and implementation of marketing and advertising campaigns, licensing and reporting issues, compliance with usury laws and other limitations on pricing, compliance with state and local “predatory lending” laws, drafting or obtaining opinion letters on a single- or multi-state basis, interstate branching and loan production office licensing, evaluations and modifications of new or existing products and procedures, debt collection and servicing practices, proper methods of responding to consumer inquiries and furnishing consumer information, as well as proposed or existing arrangements with settlement service providers and other vendors, and the implementation of procedural or other operational changes following developments in the law.

Ralph is a member of the Governing Committee of the Conference on Consumer Finance Law. He is also the immediate past Chair of the Preemption and Federalism Subcommittee for the ABA's Consumer Financial Services Committee. He served on the Law Committee for the former National Home Equity Mortgage Association, and completed two terms as Co-Chair of the Consumer Credit Committee of the Chicago Bar Association.

Ralph received his Juris Doctor from the University of Illinois College of Law, and his undergraduate degree from the University of California at Los Angeles (UCLA). He is a member of the national Mortgage Bankers Association, the American Bankers Association, the Conference on Consumer Finance Law, DBA International, the ACA International Members Attorney Program, as well as the American and Chicago Bar Associations.

Ralph is admitted to practice in Illinois, as well as in the United States Court of Appeals for the Seventh Circuit, the United States District Courts for the Northern and Southern Districts of Illinois, and the United States District Court for the Eastern District of Wisconsin, and has been admitted pro hac vice in various jurisdictions around the country.